SK hynix ADR Rapidly Included in Domestic and Overseas ETFs: "Undervaluation Expected to End"

Up to KRW 7 Trillion in Capital Inflows If Included in Three Major U.S. Semiconductor Indices
Valuation Expected to Rise to Half That of Micron

The inclusion of SK hynix's American Depositary Receipts (ADR) in exchange-traded funds (ETFs) is rapidly progressing following its listing. If SK hynix ADR is added to U.S. semiconductor-related indices, such as the Nasdaq 100, it is expected not only to create favorable supply-demand effects but also to help normalize the company's currently undervalued valuation.

Yonhap News Agency

According to ETFCheck on July 14, as of the previous day, two globally focused ETFs listed in Korea have already included SK hynix ADR (SKHY). TIGER Global AI Active ETF has allocated 0.99% of its portfolio, an estimated KRW 7 billion. TIME US S&P500 Active ETF has included SK hynix ADR at 0.69%, amounting to approximately KRW 2.854 billion.

Going forward, the ADR is expected to be included not only in U.S.-based indices but also in U.S.-listed ETFs. Potential candidates include U.S.-listed semiconductor ETFs such as VanEck Semiconductor ETF (SMH US) and iShares Semiconductor ETF (SOXX US); ETFs tracking indices like the Nasdaq 100; emerging market ETFs such as Avantis Emerging Markets Equity ETF (ZVEM); and thematic funds like the iShares AI Innovation and Tech Active ETF (BAI US).

According to the Research Center of Mirae Asset Securities, the expected total amount of SK hynix ADR to be included in these ETFs may exceed USD 736 million (about KRW 1.1062 trillion). Jae Hong Yoon, a researcher at Mirae Asset Securities, explained, “In the case of TSMC ADR, which is most comparable to SK hynix in terms of industry and market capitalization, the amount held by ETFs excluding semiconductor sector passive funds is approximately USD 12 billion. Considering TSMC ADR’s total market cap, demand for SK hynix ADR could exceed USD 700 million. Listing the ADR could thus bring significant inflows from funds and ETFs.”

On the New York Stock Exchange, a series of leveraged ETFs linked to SK hynix ADR are also being launched. Leveraged Shares, ProShares, and GraniteShares are introducing 2x leverage SK hynix ADR ETFs on July 13 and 14. GraniteShares will also offer a 2x inverse product based on SK hynix ADR.

Industry observers anticipate that ETF inflows into SK hynix ADR will serve as an opportunity to normalize its valuation, currently discounted relative to other U.S. semiconductor stocks. An asset management company official stated, “If SK hynix ADR is included in any of the three major U.S. semiconductor indices, the amount of ETF-based buying could reach about KRW 7 trillion, and should it join the Nasdaq 100, capital inflows may intensify further. SK hynix’s valuation remains about half of Micron’s, which is listed in the U.S. The ADR listing could be an event that narrows this valuation gap.”

Another industry source commented, “As the stock is directly compared and traded against global competitors in overseas markets, its previously undervalued price could become normalized.” However, the source also cautioned, “In the initial stages of listing, a premium may form, leading to price discrepancies between the underlying stock and ADR, and temporarily dispersing demand in the domestic market. Over the long term, as investor demand expands from Korea to global institutions and individuals, ETF-linked capital inflows from abroad may provide a certain level of downside support.”

This content was produced with the assistance of AI translation services.